Francis Fukuyama in his End of History essay, Gavin Jacobson writes in the TLS, “is ordinarily read as the apologia for rampant capitalism and Anglo-American interventions in the Middle East. Yet little ‘Redemption’ is to be found in his liberal, end-state. Indeed, the [future, Fukuyama wrote], risked becoming a “life of masterless slavery”, a world of civic putrefaction and cultural torpor, exfoliated of all contingency and complication. “The last men” would be reduced to Homo Economicus, guided solely by the rituals of consumption, and shorn of the animating virtues and heroic drives that propelled history forward”.
Fukuyama warned that people would either accept this state of affairs, or, more likely, revolt against the tedium of their own existence.
Effectively since the Great Wars, but more particularly, “since the financial crash of 2008, across Europe and in the United States, there has been (to borrow a phrase from Frank Kermode) a “sense of an ending”. Liberal orthodoxies have fallen into radical doubt. Populist movements are arrayed against the political and economic order that has stood in place for the past fifty years. Electorates have leaped into unknown futures”, Jacobson concludes – linking this to Fukuyama’s prediction that Homo Economicus’ ennui ultimately would lead them to revolt.
Well, orthodoxies have indeed fallen into doubt – and, for good reason: The prevailing liberal construct, with its grand theory about bringing peace and economic prosperity to the world by pulling down borders and uniting mankind into a new universal order, is in serious disarray. It has lost its credibility.
Let us not tarry too long over its recent history: the faux recovery; the massaged statistics, the panglossian narrative, the bailout of the financial system plus the ‘austerity’ deemed essential to whittle down the overhang of government debt, precisely incurred in order to bailout the financial system – with all austerity’s substantial hurts, justified in the name of restoring European competitivity.
But, as former US Budget Director, David Stockman has noted, the idea to restore competitivity in this way, always was nonsense. Central Bank policies of quantitative easing (QE) – the ‘loose credit’ tsunami unleashed at ‘no cost’ interest rates, over the last couple of decades – landed the ‘60%’ with a high cost economy which exactly precluded competition: “The Fed [in co-ordination with other Central Banks] drove up costs, prices and wages at 2%, come hell or high water. You do that for two or three decades and, all of a sudden, you are totally uncompetitive. You have the highest cost structure in the world economy, and the jobs and production migrate to where companies can find lower costs and better profits.”
So here we are (after all the talking up of ‘recovery’), with Italy’s economy shrinking again, and now, with the German economy, Deutsche Bank warns, drifting toward recession. (German factory orders posted in December 2018 their biggest year-on-year slump since 2012). Evidently ‘the grand theory’ has not worked. So what does all this spell for the future of Europe?
“The idle vassalage” into which the majority would sink, which Fukuyama foresaw (and lamented), was already in evidence well before 2008 in European states, including Britain. Slavoj Žižek wrote in The Ticklish Subject: The absent centre of political ontology (1999) that “the conflict of [earlier] global ideological visions embodied in different parties which compete for power” had been “replaced by the collaboration of enlightened technocrats (economists, public opinion specialists…) and liberal multiculturalists … in the guise of a more or less universal consensus”. Tony Blair’s notion of the “Radical Centre” was, Žižek notes, a perfect illustration of this shift.
And, infatuated with the clarity and intellectual rigor of their vision centred on the unification of Europe, the ‘liberal’ élites have come to view it not as one legitimate political option among others, but as the only legitimate option. The moral illegitimacy of Britain’s Brexit thus became the unrelenting theme for decrying the Brexit vote. Adherents of the grand theory now find it increasingly difficult to see any need for the kind of toleration for national, cultural self-determination they once permitted. Tolerance, like nationalism, is out; anger is in.
Where now, if Europe is stalling economically? What might be the political repercussions? Recall what occurred in Japan some years ago: Japan was also over-indebted, the stock market bubble had popped in 1989, and financial experts had forecast a massive collapse of JGBs (Japanese government debt). What happened then was that Japan found itself in an economic stagnation that has lasted for decades. Is this then the future? Is the whole world about to ‘turn Japanese’ where, having so much debt, we cannot somehow return to historical normal yields (historically around 5%)?
The Japanese it seems just accepted the ‘tedium’. Does Europe too just move to a very low-yield, low-growth, stagnation – within a global paradigm of stasis – that persists until we get to the point where there is either some populist uprising, or some event that resets the system.
Maybe not: Japan was always a special case. Its’ debt was held almost entirely domestically, and growth was occurring elsewhere in the world – albeit not in Japan. Nonetheless Japan serves as a ‘canary in the coal mine’ of the deadening consequences of excessive debt loads.
Were we, however, to enter into a period where the US and Europe see little growth, and China is down at 4% and struggling – and having to bail out its banking system, and India hasn’t come through as people thought it would, then perhaps ‘this time’ Japan may not be such a good guide.
The point here is that we are at the crux of our dilemma: ‘the enlightened technocrats’ not only have got it wrong, but they have ‘painted themselves into the corner’ of yet more austerity for the 60%; and of throwing fiat money (perhaps even helicopter money) at economies already zombified by debt overload. One expert, Peter Schiff, always expected this:
“The reason that I originally said that I did not expect the Fed to raise rates again, was because I knew that raising rates was the first step in a journey that they could not finish: that in their attempt to normalize rates, the stock market bubble would burst, and the economy would re-enter recession.”
“Normalizing interest rates when you’ve created an abnormal amount of debt, is impossible.”
“I knew all along that at some point, that would ‘be it’, you know: the straw that breaks the camel’s back. I didn’t know how many rate hikes the bubble economy could take, but I knew there was a limit. And I still knew that there’s no way they were ever going to get back up to normal or neutral (rate of interest). Whatever that number is – It ain’t 2%.”
“Everything that the Federal Reserve built up based on cheap money, was starting to implode as the cheap money was being withdrawn … The US economy is built for zero. It’s not working at 2% and you’re starting to see that.” (Schiff was speaking at the Vancouver Investment Conference).
Europe, it seems then, indeed is hovering at the cusp of debt-induced recession. And the Central Bankers have no response. But to speak about the first recession in 26 years, is also to speak about a Europe where the youngest generation has no experience – no concept – of what a recession is really like. What does that imply? Grant Williams, founder of the influential financial Real Vision Television gives one answer:
[This is one thing that I really wanted to be proven wrong on]. “And that is that for the last several years, I have predicted a dramatic increase in populism, social unrest, and violence. And a lot of people thought we were conspiracy theory nutcases. Now, Paris is on fire … There is the old joke about the difference between a recession and a depression: It’s a recession when your neighbor loses his job and it’s a depression when you lose yours. That’s what I fear. I think that you’ll find that after ‘08 people understand a lot more about finance than they did before ‘08. They may not realize it, but I think they now understand bailouts, they understand how unfair bailouts are when they’re targeted at Wall Street, as opposed to Main Street. And I think that what you’re going to see, sadly, is the Fed and the government will do what they’ve always tried to do, which is bail out Wall Street to ‘save the system’.
If you have a bad economy and you have people feeling like they’re disenfranchised and you tell them, you know what, we need to do this to save the system, well, suddenly the reaction changes. And the reaction is to hell with it, let’s burn the system to the ground. And if we’re in that place, which, again, it feels like we are – when you have this chasm between left and right in politics, you have an economy that is running on fumes, you have a stock market that is potentially at all-time highs, and you have a moment in time where things like the national debt start to matter, I worry like you do that the only way people are going to be able to express this is the way they are doing it in France now. And that is going to be a very, very bad outcome for one and all.”
Here, Williams’ discourse intersects with Fukuyama’s attenuated Homo Economicus: What happens when the latter, guided now solely by the “rituals of consumption in a world of civic putrefaction and cultural torpor” (now disembedded from the sense of esteem that comes from being valued as a human precisely as member of a family, a culture, a history, a people, a spiritual tradition or, a nation), faces the abyss: ‘the void’ of recession. Fear thrives particularly in the empty construct of an homogenized universality – absent to values, such as truth, beauty, vitality, integrity and life.
Williams responds simply: “Europe fails”.
“Macron is interesting. Macron came out of nowhere. Here we have an ex-Rothschild banker who was put up as the alternative to the very unpalatable – to the establishment anyway – Marine Le Pen … Well, guess what? The establishment pulled Macron out of nowhere: Young, handsome, erudite, very much in the Obama mold, who … spoke well, he looked great, he was very presentable, he was stylish. And Macron was that in spades. The fact that he was an ex-Rothschild banker seemed to pass-by most of the people voting for him. And he got it. And the establishment breathed a huge sigh of relief.
“But, guess what? He’s turned out, again, to be an appalling President. His approval ratings are – I don’t know if I’m right in saying they’re below Hollande, but they’re down there with Hollande, which I thought would be a remarkably difficult thing to do – but he’s achieved it with some ease. So I think Macron, to me, represented the establishment’s last roll of the dice. You know, here’s a guy, we’re going to put him in there, we’re going to get him to say all of the things we need him to say, and he’s going to calm things down, and he’s going to help this whole thing blow over. And nothing of the sort has happened. I think that … this populist movement is not going to just go away, and be placated. I think what’s happened to Macron in France is the absolute embodiment of that. So the fact that he is struggling, the fact that he is looking as though – I mean, in years gone by he would have already stepped down. Back when politicians had some shame, he would have already stepped down and taken responsibility for the state of the country. But they don’t do that anymore.
“So a failure of the EU is [that] everybody has their own currency and everybody has a border again. Now, the key to this is going to be the euro. Because it is the monetary union that is creating the problems now. It worked great when interest rates were going in the right direction. It worked great for everybody. Now they’ve started to go in the other direction and the debts have started to matter and the pressure is on these countries … People don’t understand what the euro represents. [Yet] they know that they can’t make ends meet.
“And they know that an answer to this from a political standpoint is to go back to – I’ll use Italy as an example – is to go back to the lira, pay off all of your debts in lira – a massively devalued lira – and not be forced to maintain a budget deficit that is dictated by Brussels – and to be able to spend and help your country come out of a recession. That’s what’s going to happen. It was always going to happen.
“But the way the bureaucrats in Brussels treat everybody – because they have to toe a hard line, they have to use the stick and not the carrot to keep this thing together – is we’re going to be all Brexit”.